[ergodicity001]

I read that small businesses' ad spending account for over 90% of Facebook revenue.

If there is one thing you don't want to be right now, it is a small business owner fighting to bring employees back to work in an unsafe environment while operating at reduced capacity. What's the incentive for the employee to return to work? Jim Cramer said it well on CNBC when he asked how he can compete with the federal government to bring people back to work:

https://youtu.be/qG_Nq7kIojI?t=367

This is Jim Cramer we are talking about. He can probably even afford to overpay (and outbid the federal government) for a while to bring back his restaurant staff. Regular small businesses don't enjoy such advantages.

When these small businesses start rolling over one by one, there will just be a lot fewer small businesses left. And those who do survive will probably shrink their ad budgets.

I once heard a funny comment: Google shows you ads for stuff you know you want to buy. Facebook shows you ads for stuff you didn't know you want to buy (search intent of course). I would say search intent will drive ad spend for the foreseeable future. Plus, if it is a secular bear market for small businesses, ad rates on Google would also come down for those small businesses which do make it out alive at the end of COVID.

[save_ferris]

That all makes sense, I guess I don’t follow how the recession of the advertising market would reduce engagement on FB. Sure, FB would probably see a revenue decline, but the users would still engage whether or not there would be ads on the site.

And while I agree that ad budgets are probably about get slashed across the board, I see more companies shifting from older, more expensive ad spending strategies towards online and Facebook. They’re in the most competitive position in the aggregate advertising market, way cheaper and more effective than traditional advertising channels.